Grainne, Author at GMJ Associates

The Changing Nature of Work: Ethical Dilemmas for Business Leaders

We previously looked at some of the ethical dilemmas that technology is bringing down the line for business leaders. In this post I want to focus on some of the ethical dilemmas business leaders face due to the changing nature of work.

Artificial Intelligence Replacing Workers

One of the major issues we looked at with technology is the rise of artificial intelligence and the impact this is going to have on jobs, especially middle-grade jobs. Some researchers have predicted that 47% of US jobs are at high risk of automation over the next 20 years. Middle-grade work will be valuable enough to be worth replacing with robots leading to a potential polarisation of jobs. The people left working will be doing either very menial and badly paid work (so not worth replacing with a robot) or incredibly high-level work (too complicated and expensive to replace with a robot).   The message to the young is clear – get educated to as high a level as you can and never stop learning!

With middle-grade jobs taken over by robots we have the potential for a generation left behind and unable to provide for themselves leading to massively increased inequality in society. For example supermarket or manufacturing plants could choose to automate and while this could help cut costs, offer better returns to shareholders and better prices to consumers, can the firm maintain its social licence to operate in communities devastated by unemployment?   It’s easy to talk of re-skilling but much harder to do effectively. I argue that we have still not cracked it in terms of providing our children with an education that will make them adaptable and able to pivot in their careers as they will undoubtedly be required to do. We certainly haven’t worked out how to retrain adults working in jobs that will inevitably be automated and enable them to participate in the new economy.

The Changing Nature of the Work Contract and Increased Freelancing

The nature of the work contract is also changing dramatically. The days of staying with one company for a long time are gone. Movement of employees brings headaches for business leaders who are trying to ensure business continuity and protect intellectual property. But as well as this, increasing numbers of workers are freelancers with so-called portfolio careers. In fact the Dean of the Trinity Business School, Professor Andrew Burke who has done a great deal of research in this area, says freelancers are the fastest growing segment of the workforce over the past 15 years. As his research has shown, freelancers can bring great benefits to businesses, can allow them bring new business ideas to market efficiently, can allow business trial new streams and bring in valuable short-term expertise. It can also benefit the freelancer, allowing them to get involved in projects that interest them and build depth of skill and knowledge. But use of freelancers also brings major challenges for business leaders who want to create a strong ethical culture. How do you maintain your history and tradition without continuity among your employees? How do you get someone on a short-term contract to buy into your business’s values? And indeed how do you ensure that the work they do and the decisions they are entrusted with are responsible and ethically sound?

What duty is there for leaders of firms that utilise freelancers and contractors to ensure that these people are reasonably protected from risk? Defined benefit pensions are a thing of the past for most employees but there are still pension plans and some kind of fall back in the case of serious illness. Not for the freelancer. And yes I’d agree that is a responsibility borne by the freelancer. An utterly unscientific survey of some people I know doing freelance work has left me shocked at the lack of good pension provision and lack of serious illness cover. If the proportion of freelancers continues to grow, we face the possibility of a generation without the means of supporting themselves in old age. The social disruption of this could be enormous. Older consumers without money to spend are not good for business. Neither are middle years consumers who lack disposable income due to the strain of financially supporting their parents. So although it may not be our responsibility to care about provision for these freelance workers, (don’t we pay them a premium to place the responsibility on them?) maybe we need to find a way to make it happen. Is there a case for developing contracts with freelancers and contracting firms that clarify the percentage of the freelancer fee that is intended to be for future pension provision and risk mitigation? It would also be a way of focusing minds on what is a truly appropriate fee for freelance work.

The Gig Economy

The use of technology platforms to broker business relationships has led to increased opportunities for people to generate new income streams (Airbnb and Uber are well known examples) by participating is the so called ‘gig economy’. This new form of working is for many people a lifeline, allowing them to generate income from existing assets or choose when it suits them to give up their time for income. But where to draw the line in terms of responsibility has become increasingly blurred. A recent Sunday Times article highlighted that many Uber drivers had to work very long hours to make a reasonable income (or even an unreasonable one) leading to concerns about tiredness and safety. Is monitoring the hours worked the responsibility of the individual driver or the company? Morally, it’s both. But is it reasonable to expect the individual driver who is struggling to earn enough to pay his bills to pack up and go home after a set number of hours. Regulation and the law will take some time to catch up with developments. But a savvy and responsible business leader should be considering these issues in a context that is much wider than mere cost minimisation and profit maximisation. The UK government’s recent decision that Deliveroo must treat delivery workers as employees and pay them minimum wage is an indicator of the efforts to impose regulation and find a path through this new way of doing business .

Reduced CEO Career Lifespans and Increased Average Wage Gaps

The expectations have also changed for the CEO role. With CEO average tenures reduced to only about 5- 8 years in the USA, there’s a lot of pressure for quick results over responsible nurturing of the company. The shortened lifespan of a CEO has led to inflated salaries and bonuses to compensate and a growing concern about the increasing pay gap between the top of the tree and the average worker. In the USA we are seeing a shrinking middle class and increases in income inequality. Large numbers of low-income citizens are not good for business long-term. The concept of fairness is deeply ingrained in human beings. We tend to react to perceived unfairness so greater disparity will lead to social unrest and a backlash against industries or companies seen as particularly guilty of promoting such division.

How Should Business Leaders Approach These Issues?

Every business is facing their own unique set of circumstances but there are some basic questions about the changing nature of work that every business leader should consider:

• Is what we are doing fair?
• Are our employment practices reducing or increasing risk and what is their effect on the long-term sustainability of the business?
• What impact will our employment practices have on society?

Are tough targets the cause of unethical behaviour? VW?

Setting business goals

A report today on the Irish Times website about the VW emissions scandal finds the major catalyst which led to a ‘chain of mistakes’ was the introduction of tough emissions regulations in the USA. The company had introduced a big push on diesel sales with presumably some pretty tough sales targets. The Irish Times report tells us that “Engine developers could not find a way to meet permissible means to comply with tough US emissions regulations, at least in the timeframe and budgets available. That led to the installation of the cheat software that could determine whether a vehicle is on the road or a test bench.” VW’s Chairman is reported by the Guardian to have said that “engineers had installed defeat devices in diesel engines after realising they could not hit emissions targets by permissible means”.

We don’t have to look far to see examples of stretch targets being pinpointed as the cause of unethical behaviour. The sales person who brings forward an order to meet quarter-end figures, the lawyer who overstates hours spent on a client’s file to meet billing targets, the acceptance of risky mortgages to meet lending targets. In the auto industry two famous cases stand out. The fraudulent behaviour by Sears auto mechanics in doing un-needed work on customers’ cars in order to meet performance quotas is outlined by Lynne S. Paine in her seminal 1994 HBR article on organizational integrity. The famous case of the Ford Pinto, made to a strict price and weight target is often referenced in the business ethics literature. A saving of only a few dollars on the car’s fuel tank resulted in many deaths and horrendous injuries.

So tough targets appear to be potentially problematic. But I think we’d all agree that we need targets to push ourselves to achieve. Most of us know the great feeling of having managed to make a difficult target. It’s exciting, it gets the adrenalin going and it builds confidence in our own abilities, setting us on course to do even better. As managers we need to set targets to ensure the business achieves what is required. A world without targets would not get us where we need to go. Why else the time and effort being put into the COP 21 goals? So what dangers do we need to be aware of as managers when we are setting goals for our businesses?

Over emphasis on a specific goal – Targets are often set as a response to a particular business need such as meeting a deadline date or improving financial performance, maybe even with a view to saving the company which makes goal achievement even more urgent. The danger here is that we become over focused on a narrow target rather than considering the broader impact on the business. Ask yourself if you are over-simplifying the target without fully considering what you want to achieve e.g. increase sales of diesel models this year rather than maintaining brand reliability and trust which will in turn yield strong sales figures.

Over emphasis on goal achievement without considering how – If the achievement of the goal becomes the main focus it’s easy to lose sight of how it’s being achieved. This leads to a ‘just do it’ mentality which can be very dangerous as people can feel they have been given permission to do whatever it takes even if they cross a line. The behaviours have to matter too and we need to focus on more than a very narrow behaviour set. Behaving unethically has to be clearly and emphatically understood as unacceptable. So as managers we need to make sure we have the how we want to achieve conversations as well as the what we want to achieve conversations about targets.

Making the non-achievement of goals too scary – If we make the non-achievement of goals so scary that people feel they have little choice but to bend the rules we probably shouldn’t be too surprised when they do. Sears mechanics were reportedly scared that they would lose their jobs if they did not meet the set targets. We need to remember that scary can be a perception as much as a reality. So if people feel they might lose their jobs for example, that’s enough to influence behaviour, even if there is no actual intention to let people go.

Understanding the potential for humans to self-rationalise bad behaviour – I don’t know how many times I’ve come across bosses shocked at discovering that the employee they perceived as ‘good’ had engaged in bad behaviour. In relation to setting targets we need to understand that people can self-rationalise their bad behaviour if it leads to the ‘good’ outcome of achieving the goal. There is also evidence to suggest that people close to the achievement of a stretch target are more likely to do this than those some way off the target. So maybe you need to be thinking about the high performers and how you might unwittingly be encouraging them to rationalise doing something wrong.

Many years ago I saw examples of bad and good goal setting in action that have stayed with me ever since. In one company there was an admin team whose primary job was to process documentation. Their secondary role was to take calls from other departments with customer queries. In a push to deal with a backlog of documentation a stretch goal was put in place to encourage staff to make additional effort. A bonus was to be paid to the person who processed the greatest number of documents with the lowest error rate. Unfortunately the secondary role of the department was forgotten about. The winner of the award made massive inroads in the backlog with a near zero error rate but the rest of the team felt aggrieved that she achieved this by ignoring incoming calls that had traditionally been informally shared out and answered by all.  The target had been set to deal with a very specific problem without fully considering the broader needs of the business and the behaviours that supported that broader need.

Elsewhere, a sales manager under enormous pressure to achieve his target thought about the behaviours he needed in his team to have any chance of success. The economic environment was tough, he had a mix of very experienced sales people who were close to achieving their individual targets and very new sales people who were nowhere close to theirs. He saw the danger that the experienced people could achieve their own target and then stop bothering and that the inexperienced ones would just give up altogether. So he put an extra team incentive in place – every team member would get an additional smallish bonus if the overall team target was achieved. The experienced people had a reason to overachieve and to help out their less proficient colleagues. The people who had no hope of getting their individual targets could still get some bonus by bringing in sales and of course the added advantage was that they built some pride and confidence in what had appeared to be a pretty hopeless situation. In the first situation the culture of the department was badly damaged, in the other a stretch target built and cemented a culture of team work and shared success in a department that was traditionally populated with people focused on individual success.  Oh, and they smashed their target contributing to the success of the business even under difficult trading conditions.